Small Businesses Skeptical About Future; Optimism Dips

Date: October 08, 2013

Related Content: Press Release State National

OCTOBER 8, 2013       Cynthia Magnuson-Allen 202-314-2036 (media)
HOLD UNTIL 7:30 A.M. ET     Holly Wade 202-314-2022 (research)

Too early to measure impact of the “shut-down” but economic outlook is depressed

***NOTE: Due to a processing error, August’s Index data was corrupted. The September data below is compared to the corrected August survey results.

Small-business optimism indexWASHINGTON, October 8, 2013 – Small-business owner optimism did not “crash “ in September, but it did fall, dropping 0.20 from August’s (corrected) reading of 94.1 and landing at 93.9. The largest contributing factor to the dip was the significant increase in pessimism about future business conditions, although this was somewhat offset by a notable increase in number of small-business owners expecting higher sales. Overall, four Index components improved, four fell and two remained unchanged from August. While it is premature to measure the impact of the government shut-down on the small-business sector, it’s possible that the pending “crisis” impacted economic outlook. October’s reading will reveal the full effect of Washington’s latest crisis on the small-business sector, which has remained cautious throughout the recovery. 

“The change in this month’s Index was little more than ‘statistical noise,’ but the drop in outlook for future economic conditions is evidence that many owners are keeping an eye on Washington,” said NFIB chief economist Bill Dunkelberg. “Prospects for politicians and policymakers ‘getting it right’ are low, and job creators are rolling their eyes and shaking their heads thinking, ‘This is certainly not the way to run the largest enterprise in the world.’ Between botched healthcare implementation and one manufactured crisis after another, consumers and small-business owners are likely to remain pessimistic, accepting the notion that growth is going to be sub-par and that their government is likely to continue in dysfunctional mode for months to come.”

Twenty-four (24) percent of owners surveyed in September reported cited regulations and red tape as their No. 1 business problem, 18 percent cited taxes, and 17 percent cited “poor sales”. Only 2 percent reported that financing was their top business problem.

A review of the September indicators is as follows:

•    Job Creation. Job creation was down in September. NFIB owners reduced employment by an average of 0.1 workers per firm in September after August’s slight gain (0.08 workers added on average) following three months of negative numbers.
•    Hard to Fill Job Openings. Twenty (20) percent of all owners reported job openings they could not fill in the current period (up 1 point), and 14 percent reported using temporary workers, down 2 points from August. Most of the jobs “created” will likely be dominated by part-time workers as owners hedge their hiring while they try to fathom the health care law regulations and penalties.

•    Sales. The net percent of all owners* reporting higher nominal sales in the past three months compared to the prior three months was unchanged at negative 6 percent. The net percent of owners expecting higher real sales volumes rose 3 points to 8 percent of all owners. This is welcome news asiImproved sales expectations are needed to trigger hiring and new inventory orders, but this trend is a bit inconsistent with the larger deterioration in expected business conditions.

•    Earnings and Wages. Earnings trends worsened a bit in September, falling 2 points to negative 23 percent. Three percent of owners reported reduced worker compensation and 20 percent reported raising compensation, yielding a net 17 percent reporting higher worker compensation (up 2 points). A net 13 percent plan to raise compensation in the coming months, up 1 point. With a net 17 percent raising compensation but only a net 1 percent raising selling prices, profits will continue to be under pressure.

•    Credit Markets. Credit continues to be a non-issue for small employers, 6 percent of whom say that all their credit needs were not met in September, up 1 point from August. Twenty-eight (28) percent of owners surveyed reported all credit needs met, and 53 percent explicitly said they did not want a loan (64 percent including those who did not answer the question, presumably uninterested in borrowing). 

•    Capital Outlays. In September, the frequency of reported capital outlays over the past six months rose 2 points to 55 percent. The percent of owners planning capital outlays in the next three to six months rose 1 point to 25 percent.

•    Good Time to Expand. In September, only 8 percent characterized the current period as a good time to expand (up 2 points). The net percent of owners expecting better business conditions in six months was a net negative 10 percent, 8 points worse than August’s reading.

•    Inventories.

o    The pace of inventory reduction continued in September, with a net negative 7 percent of all owners reporting growth in inventories, 2 points down from August. For all firms, a net 0 percent (unchanged) reported stocks too low, a historically “satisfied” reading.
o    Plans to add to inventories were unchanged from August at a net 2 percent, a bit inconsistent with the expectations for sales growth.

•    Inflation. Fourteen (14) percent of the NFIB owners surveyed reported reducing their average selling prices in the past three months (down 2 points), and 14 percent reported price increases (down 3 points). The net percent of owners raising average selling prices was 1 percent, down 1 point. As for prospective price increases, 21 percent plan on raising average prices in the next few months (up 1 point), and 2 percent plan reductions (down 1 point). A net 19 percent plan price hikes, up 1 point.

Today’s report is based on the responses of 773 randomly sampled small businesses in NFIB’s membership, surveyed throughout the month of September. Download the complete study at

*All net percentages seasonally adjusted unless otherwise noted. The net percentage is the percent with a favorable response less the percent of owners with an unfavorable response.

Small business optimism outlook over time

Most important problems reported by small-business owners

Reasons for small-business owners' outlook on expansion


NFIB’s Small Business Economic Trends is a monthly survey of small-business owners’ plans and opinions. Decision makers at the federal, state and local levels actively monitor these reports, ensuring that the voice of small business is heard. The NFIB Research Foundation conducts some of the most comprehensive research of small-business issues in the nation. The National Federation of Independent Business is the nation’s leading small-business association. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals.

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